Direct vs Regular Mutual Funds

Explore the difference between direct and regular mutual funds to optimise your investment strategy. Make the smart choice for your financial goals.
4 mins read
2 Apr 2024

Mutual funds are popular investment options that offer a simple and effective way to grow your wealth. When it comes to investing in mutual funds, you often have two choices: Direct vs regular mutual fund. Understanding the differences between direct and regular mutual fund options is crucial for making informed investment decisions. In this article, we will explore the distinctions between direct and regular mutual funds, so you can choose the right path to meet your financial goals.

What is a direct mutual fund plan?

Direct mutual fund plans are designed for investors who want to invest in mutual funds without involving intermediaries like distributors or brokers. In a direct plan, investors directly buy mutual fund units from the Asset Management Company (AMC) without any intermediaries. This results in certain advantages, such as lower expenses and comparatively higher returns than regular plans. Direct plans can be bought either directly with the AMC or can be bought through online through digital platforms.

Explore the ins and outs of direct mutual funds in our detailed blog post on what is a direct mutual fund?.

What is a regular mutual fund plan?

Regular mutual fund plans are the more traditional approach. In these plans, intermediaries, like financial advisors or distributors, facilitate your investment in mutual funds. They provide assistance, information, and services, but these benefits come at a cost, usually in the form of higher expense ratios because brokerage fees or commission for the broker is also involved.

Frequently asked questions

Which is better, regular or direct mutual fund?

It depends on your needs. Direct plans offer potentially higher returns due to lower costs, but require you to do your own research. Regular plans provide advisor guidance but come with higher fees and potentially lower returns.

What are the disadvantages of direct mutual funds?

The main drawback is the lack of personalised investment advice from a financial advisor. You will need to be comfortable researching and making your own investment decisions.

Is it good to switch mutual funds from regular to direct?

Yes, switching to a direct plan can save you money on fees and potentially boost your returns. However, there might be exit loads for regular plans, so check before switching.

Why are regular mutual funds better?

Regular plans might be better if you are a beginner who needs help with investment decisions. They offer guidance from an advisor, but this comes at the cost of potentially lower returns.

Which SIP is best - regular or direct?

A Direct SIP is generally better due to lower costs. This allows you to potentially earn higher returns over time through a Systematic Investment Plan (SIP).

Why is direct plan NAV higher?

Direct plans have a lower expense ratio (fees) compared to regular plans. Since the NAV (Net Asset Value) reflects the value of the fund's holdings minus its expenses, the lower fees in direct plans lead to a slightly higher NAV.

How do you convert regular MF to direct?

The process to switch from a regular to a direct plan for the same mutual fund scheme can vary depending on the fund house. Generally, you can initiate the switch online through your investment platform or by contacting the fund house directly.

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